Prioritising Environmental Obligations in Future Trade Agreements

We have commented previously about the Transatlantic Trade and Investment Partnership (TTIP) and its relationship with environmental obligations. Here, following Brexit, we turn our attention to future trade arrangements for the UK and the implications for environmental law.

As a member of the EU, the UK was not able to negotiate its own trade agreements with non-member countries, and could only do so as part of the EU Common Commercial Policy (CCP). Following Brexit, and assuming that a post-Brexit relationship between the EU and the UK does not involve UK participation in the CCP as a means for participating in the Internal Market, the UK can negotiate in its own trade agreements with non-member states and put in place trade arrangements with the EU following its withdrawal (assuming Brexit proceeds). As such, the UK Government has already suggested that discussions will take place on a new free trade deal with China – which has never had a free trade agreement with any EU country. Further, Commonwealth countries, such as Canada, Australia, India and Singapore, have also expressed interest in negotiating trade agreements with the UK.

Environmental coverage in existing trade agreements

It is widely recognised that trade agreements are increasingly incorporating environmental policies. Approximately one third of international trade agreements now cover environmental issues, and most of such provisions are legally enforceable. The growing prevalence of environmental provisions is particularly visible in relation to emerging markets, although it is notable that these trade agreements tend to be more detailed on environmental issues in certain instances than others, and the strength of the provisions are not always as robust as they could be.

The first widely recognised international treaty dealing with trade and the environment was the Agreement of Berne in 1878, which restricted trade in grapevines to prevent the spread of pests that damage vineyards. In more recent times, the World Trade Organisation (WTO) (formerly the General Agreement on Tariffs and Trade (GATT)) stipulates the rules of trade between nations and provides a framework for negotiating trade agreements to its 163 member states. Whilst the ultimate goal of the WTO is free trade, countries are allowed to restrict trade in order to “conserve exhaustible natural resources” or to protect “human, animal or plant life or health” (see Article XX of the GATT 1994). This has, however, been interpreted narrowly by the WTO’s panel rulings, as members do not want trade barriers to be used to protect domestic industry from competition.

The current preferred approach used by national governments is to enter bilateral or regional preferential trade agreements (which are outside the WTO’s remit). One of the most significant of the types of trade agreements to address environmental matters is the North American Free Trade Agreement (NAFTA). This was signed in 1993 and lowered trade barriers between the United States, Canada, and Mexico. A side agreement, the North American Agreement on Environmental Cooperation (NAAEC), set up the tripartite Commission for Environmental Cooperation (CEC). This specific attention to environmental aspects of trade was unusual and helped establish a precedent in trade agreements.

More recently, the Trans-Pacific Partnership (TPP) was signed between twelve Pacific Rim countries in February this year. According to the Office of the United States Trade Representative, the “TPP includes the most robust enforceable environment commitments of any trade agreement in history.” The TPP prohibits harmful fisheries subsidies and requires signatories to fulfil their obligations under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).

The EU’s most recently drafted agreement with Canada, the Comprehensive Economic and Trade Agreement (CETA), a benchmark for the EU’s current approach, also contains provisions on the protection of the environment, animal and plant life, the promotion of sustainable development and the preservation of natural resources.

Challenges of including environmental provisions

Inevitably, there are challenges to incorporating environmental considerations into trade agreements, as different countries have differing priorities. Many countries experience internal problems in the negotiation of environmental provisions in a trade agreement, such as lack of motivation or opposition from areas of government, and lack of capacity to negotiate on environmental issues. Developing countries in particular are also cautious that strong environmental obligations may impose an excessive burden in terms of financial and human resources, particularly when environmental protection schemes are in their infancy.

Placing the responsibility for environmental policies at the level of national governments, as opposed to under trade agreements, can limit its effectiveness. National government decisions may be more susceptible to competitive pressures to reduce environmental protection in order to reduce costs for businesses. Therefore, including environmental standards in trade agreements prevents there being a “race to the bottom” and instead encourages countries to reach the highest common denominator with respect to environmental standards.

Notwithstanding this, in many existing trading agreements the environmental provisions are criticised for being too vague and often considered ineffective. For example, CETA includes an obligation to uphold environmental standards (see Article X.4 of CETA), however measures have to be consistent with the remainder of the agreement. This weakens the provision as it is uncertain whether trade or environmental objectives have higher priority. In the TPP, with respect to CITES, countries only need to “endeavour to implement, as appropriate, CITES resolutions that aim to protect and conserve species whose survival is threatened by international trade” (emphasis added) (see Article 20.17.3 of the TPP). An obligation to “endeavour”, and only as countries deem “appropriate”, gives TPP countries considerable flexibility in achieving this obligation.

Related to this, is the issue of enforcement. For example, while the specific attention in NAFTA to social and environmental aspects of trade was noteworthy, in reality the CEC has few powers. It may respond to a country’s failure to enforce existing environmental regulations, but its role is generally limited to producing a fact-finding report and recommendations to the government involved.

Environmental obligations in future trade agreements

The nature of environmental obligations to be included in future UK trade agreements remains to be seen. However, it is likely to be an important growth area in environmental regulation and therefore businesses will need to scrutinise these obligations/provisions carefully. Of concern is whether the growing use of environmental provisions in trade agreements will weaken the UK’s commitment to environmental protection. Yet, it is likely that such matters will play an important role in debates about the shape of UK trade policy. Although challenges exist in agreeing certain and enforceable obligations, the UK will be in a strong position to learn from the challenges faced by parties under existing agreements.

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